Locally produced propane not lowering prices

February 8, 2014

ST. CLAIRSVILLE - Although Utica and Marcellus shale drillers extract large quantities of natural gas liquids from across the Upper Ohio Valley, retail propane prices are setting record levels at a time when residents need extra fuel to withstand frigid winter temperatures.

As governors of six midwest states, including Ohio Gov. John Kasich, ask President Barack Obama for help increasing their propane supplies amid a very cold winter, residential retail prices now hover around $3.90 per gallon. This reflects an increase of about $1.10 per gallon since prices were $2.80 per gallon on Dec. 30, according to the U.S. Energy Information Administration. Although EIA statistics show that propane prices have steadily increased since the average cost per gallon was $1.04 in October 1990, the recent spike is the most significant during the 24 tracking period.

"In a typical winter, an average customer will use 600-650 gallons of propane," said Heath Smith, dealer at Pivotal Propane in St. Clairsville. "Use is up this year because of the extreme cold. It was up by 35 percent in January compared to last year."

With costs on the rise, heating a home with propane could cost as much as $600 to $750 more this year compared to last because of the increase - if propane is availble.

"I know some (sellers) are out of propane," Smith said.

Smith and Mike Chadsey, spokesman for the Ohio Oil and Gas Association, said one reason supply is low is because farmers used an unusually high amount of propane during the fall to remove moisture from their corn in order to make it marketable.

"Propane suppliers were prepared for a regular winter. They didn't think it would be so cold for so long," Smith said in listing another reason for high demand.

"I think people are just burning through it very quickly because it is just so darn cold," Chadsey said.

Chadsey said natural gas processors like those working in the Ohio Valley are doing the best they can to make more propane available. Because the wet Marcellus and Utica shale gas prevalent in Belmont, Ohio and Marshall counties contains natural gas liquids such as propane, ethane, butane, isobutane and pentane - in addition to the dry methane - the materials require processing and fractionation so that each item can be marketed individually.

"A lot of these plants are not fully up to steam yet," Chadsey said. "More infrastructure needs to be built to get the products to market."

Smith and Chadsey also said just because propane may be drawn from the region does not mean it will be used here.

"You can load it onto tankers and take it anywhere. It all depends on the marketplace," Chadsey said.

Though he did not want to predict prices, Chadsey said propane costs could be lower next year if the temperatures are not as cold - and if more processing capacity comes online.

"Over the long-term, propane is still a clean and dependable way to heat your home," Smith said. "This is just an extreme situation."